May 22, 2011

Lodestar/Reasonableness Of Fees: Two Drastic Haircut Fee Decisions--One Reversed And One Affirmed

Justice Bedsworth Gives Us Two Fee Case “Gems.”

Justice Bedsworth, who sits on the Fourth District, Division 3 (the venue where co-contributors Marc and Mike are based practice-wise), has written two interesting decisions on lodestar/reasonableness of fees. Both involved trial court decisions dramatically cutting fee requests. On appeal, one got reversed and the other got affirmed in 3-0 unpublished decisions. So, here we go on what was at play in each.

In a somewhat unusual personal injury case where passenger sued driver/owner of the car when driver fell asleep and struck a parked car off the road, plaintiff passenger--who was injured quite severely--served driver with a $250,000 998 offer after learning of insurance coverage limits. Defendant driver accepted, with plaintiff then seeking $100,000 in attorney’s fees under Code of Civil Procedure section 1021.4 (a fee shifting statute allowing recovery of fess against a defendant who has been convicted of a felony). However, the trial court only awarded $5,150 in attorney’s fees.

The appellate court ruled that the lodestar adjustments must be explained by stating each reduction factor and dollar adjustment, something not done in this situation. Because the payment to plaintiff did not occur until deep into the case, the fee award should have been justifiably higher, constituting an abuse of discretion even under the deferential standard.

This case was an appeal from a prior appellate remand where a $20,000 fee award in a class action (out of a requested $263,606 in fees) was reversed because the lower court was unclear on what method was used to determine the award--value of the case approach (not used in California), a contingency measure, a common fund approach, or lodestar method. The prior reversal was necessitated by the less than 10% fee request award needing to be recalculated through adherence with the proper lodestar method. (See our December 23, 2009 post for a synopsis of the prior appellate decision.) On remand, the trial court reexamined the evidence and determined $26,543.10 was a reasonable fees/costs award.

On appeal the second time, the appellate court affirmed the fee award. Here, plaintiffs argued that the lower court did an improper “double dip”--namely, reducing the lodestar for various inefficiencies/duplications and then applying a .15 multiplier that resulted in a 85% lodestar discount. Justice Bedsworth, on behalf of the reviewing panel, found this approach was proper, because the cases cited by plaintiffs involved the inverse (increasing the lodestar figure and then using the same factors to add a positive multiplier, which impermissibly gave the fee claimant two separate multipliers). In this instance, the trial court’s power to do what it did was authorized under Chavez v. City of Los Angeles, 47 Cal.4th 970, 990 (2010) [one of our Leading Cases], allowing the lower court to deny completely an inflated request. The lower court decision in this situation “does not reflect ‘double-counting’ of the same factor, as the [plaintiffs] claim, but instead demonstrates the court’s express authority to go beyond simply fixing the inflated request, and take additional action designed to affirmatively discourage such conduct.” (Slip Opn., p. 11.)